AP News, April 10th, 2007
PPR SA, the French luxury goods maker behind the Gucci and Yves Saint Laurent brands, said Tuesday it is buying a 27.1 percent stake in Puma AG and plans to make an offer for the rest in a deal that values the world's third-largest sporting goods maker at $7.1 billion.
Herzogenaurach-based Puma welcomed the offer and said management would recommend it to shareholders.
PPR said it was paying 1.4 billion euros ($1.9 billion) for the stake in Puma held by the Mayfair investment company.
Following that deal, PPR said it plans to launch a "friendly takeover offer" for Puma's remaining shares at the same price of 330 euros ($441.11) per share. It said it expects to complete the offer in early July.
Puma's board "unanimously believes that PPR's engagement is in the best interests of the company and that the announced offer price per share ... for the voluntary public takeover offer is fair," Puma said in a statement.
Puma shares soared 9.4 percent to close at 343.93 euros ($461.76) _ above PPR's offered price _ in Frankfurt. The shares had risen more than 10 percent on Thursday, the last trading day before the Easter weekend, on talk of a possible bid. PPR shares rose 3.2 percent to close at 133.03 euros ($178.61) in Paris.
"We guarantee Puma's continuity as an autonomous company within the PPR Group," PPR Chief Executive Francois-Henri Pinault was quoted as saying in Puma's statement.
Puma added that "there will be no changes with regard to staffing."
Established in 1948, Puma is one of the world's biggest sporting goods companies after U.S.-based Nike Inc. and Adidas AG, which also is based in Herzogenaurach. It has some 7,800 employees.
Puma has been working to expand its reputation as a maker of lifestyle brands _ clothes, shoes and accessories such as eyeglasses _ and expand in more regions and categories.
Last year, it launched a joint footwear collection with Alexander McQueen, also part of the PPR group.
In 2006, it earned a net profit of 263.2 million euros on sales of 2.37 billion euros.
Executives of PPR, which also owns luxury brands Balenciaga and Stella McCartney as well as the Fnac music chain and Conforama furniture chain, described the offer price as "firm and final" during a conference call.
Chief Financial Officer Jean-Francois Palus said that "we will not endanger our credit rating with acquisitions."
Still, Puma shares' rise above the offered price appeared to raise the possibility that PPR might have to raise its bid _ or that another bidder might enter the fray.
Standard & Poor's placed its corporate credit ratings on PPR under review.
That "reflects uncertainties regarding the bid's cash impact, which in turn depends on whether all of Puma's existing shareholders pledge their shares, and the final price paid by PPR, which could exceed 5 billion euros," S&P credit analyst Nicolas Baudouin said in a statement.
Puma Chief Executive Jochen Zeitz stressed that his company considers PPR "the right partner" when asked during a conference call about the possibility of a rival bid _ which he described as "very hypothetical."
He said that "should there be another offer, we'd closely examine it."
S&P pointed to the benefits for PPR of buying Puma.
"Acquiring Puma would provide PPR with an international brand carrying strong worldwide recognition, as well as diversification into the sportswear industry, which enjoys strong growth prospects," the agency said.
A stake of more than 25 percent in a German company gives the holder a blocking minority, ensuring significant influence over decisions.
Mayfair manager Rainer Kutzner said that "it was not an easy decision" to sell the stake, but that PPR was an "ideal partner" for Puma and the deal was a rare opportunity.
Hamburg-based Mayfair is an asset management company for members of the Herz family, which founded Germany's Tchibo coffee and clothing retailer. Siblings Guenter and Daniele Herz took their stake in Puma, via Mayfair, in May 2005.
